From NPA to FIR: ABG fraud case moved at sloth speed

New Delhi: The Rs 22,842 crore ABG Shipyard bank fraud has raised questions about the way the matter was dealt with, first by officials of the State Bank of India (SBI) and then by officials at the Central Bureau of Investigation (CBI), both of whom moved at a snail’s pace—first in notifying that a scam of this mammoth scale had taken place and then registering an FIR in the case.
Every action that led to this fraud eventually coming out in the public domain earlier this month, was marked by extreme delay, either by omission or commission, by officials who were responsible for reporting it to the investigating agencies and the investigating officials themselves who took their own time to investigate this scam before finally filing a formal FIR.
In all, an FIR against the operators of the loan account, which was identified as a Non-Performing Asset (NPA) by the SBI in July 2016, was eventually registered in February 2022—five-and-a-half years later. As per the complaint by the State Bank of India (SBI), the fraud in the accounts was committed between April 2012 and July 2017.
The loan account of the group, which had become “bad” by November 2013, was classified as an NPA by the bank in July 2016, 32 months after it became “bad”. The report of the forensic audit of the account was submitted to the bank by the auditors in January 2019, 30 months after it was declared as an NPA.
The SBI finally declared that a fraud had happened in the account in June 2019, five months after the audit report. It took the SBI five more months to report the same to the CBI, which it did in November 2019. It was at this point that CBI entered in this matter.
In all, for an account, which was declared as an NPA in July 2016, the SBI took almost 40 months to report it to the CBI. This slow pace was also passed on to the CBI, which after “studying” the SBI’s complaint, wrote back seeking “clarifications” in March 2020, five months after it was first notified by the bank of the fraud.
Continuing its sluggish pace, the SBI replied to the CBI’s demand for clarifications on certain issues only in August 2020, five months after receiving the CBI’s questions. Importantly, among the clarifications that were issued by the bank, states: “The staff accountability has been dealt with and closed by the competent authority on 6 November 2018.” The clarification was regarding why no employee of the bank has been identified as a suspect by the SBI in its complaint to the CBI.
It was 17 months after receiving this reply and clarification from the bank that the CBI finally filed an FIR in the case on 7 February 2022. The CBI was first apprised of this fraud 25 months ago, in November 2019. SBI has denied that any delay was done on its part in notifying that fraud had happened in the account. However, its own complaint to the CBI presents a picture that is opposite to what it is now claiming.
The journey of the account being classified as an NPA, being declared as a fraud and the FIR being registered in the case happened under the tenure of three SBI Directors—Arundhati Bhattacharya (October 2013-October 2017), Rajnish Kumar (October 2017-October 2020) and the present Director, Dinesh Kumar Kharra, who joined at the said post in October 2020.
The CBI, when the SBI’s complaint first landed on its desk, was headed by M. Nageshwar Rao (October 2018-Febraury 2019). It saw three more Directors—Rishi Kumar Shukla (February 2019-February 2021), Praveen Sinha (February 2021-May 2021) and Subodh Kumar Jaiswal (May 2021-present)—before it was eventually turned into an FIR. In a press release, the CBI stated that the majority of the disbursement in this case happened between 2005 and 2012. According to the agency, the fraud was done by primarily transferring huge amounts by ABG Shipyard Ltd to its related parties and subsequently making adjustment entries. The company also made huge investment in its overseas subsidiary by diverting the bank loans and funds to purchase huge assets in the name of its related parties.
There were different kinds of bank loans, including CC Loan, Term Loan, Letter of Credit, Bank Guarantee etc., that were given as advance by the banks. According to CBI, the withdrawal of General Consent to the CBI investigation by certain states has made the registration of bank fraud cases more challenging. The CBI has stated that there are around 100 high-value bank fraud cases that could not be registered due to non-accordance of specific consent u/s 6 of DSPE Act by state governments where the general consent has been withdrawn.